Sirius XM Stock Saved by Liberty Media (SIRI)

Posted on Tue 17th Feb, 2009 01:55:13 PM

Shareholders of Sirius XM Radio (SIRI) are rejoicing today as plans were revealed this morning to keep the company from filing for bankruptcy. Even though the stock is trading for pennies some value is better than none at all, right?

In heavy trade SIRI stock is up $.08 to $.18 on the day (+80%). The stock peaked at $.23 in the early trade.

MarketWatch breaks down the details:

Shares of Sirius XM Satellite Radio as much as doubled Tuesday morning on news that John Malone’s Liberty Media has agreed to invest a total of $530 million in the the beleaguered radio company, allowing it to avoid a Chapter 11 bankruptcy filing.

Under the first phase of the transaction, Liberty Media will loan Sirius XM $280 million — $250 million of which will be funded on Tuesday. Sirius XM will use some of the proceeds of that loan to pay $171.6 million of the $175 million in 2 1/2% convertible notes that are due at the end of business Tuesday.

Liberty’s loan to Sirius XM will bear interest at a rate of 15%, and will be due in December 2012. It will be secured by the assets that secure Sirius XM’s existing credit agreement.

In the second phase of the deal, Liberty will loan another $150 million to XM Satellite Radio, Sirius XM’s wholly-owned subsidiary. Liberty has also agreed to offer to buy up to $100 million of the loans outstanding under XM’s existing debt agreements.

Once both phases are completed, Sirius XM will issue Liberty 12.5 million shares of preferred stock, which Liberty can convert into 40% of the company’s common stock. Liberty Chairman John Malone and Chief Executive John Maffei would then join Sirius XM’s board of directors.

For John Malone this is exciting as Charlie Ergen, chairman of EchoStar (SATS) and Dish Network (DISH) were also in discussions to step in and do a deal with Sirius XM.

Sirius XM stock chart below. For further discussion head over to the SIRI page on the stock forum.

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